Despite abysmal jobs report, U.S. will emerge stronger thanks to its flexible system
The U.S. economy lost a gargantuan 663,000 jobs in March, the U.S. Labor Department announced Friday, with the nation's unemployment rate jumping to 8.5 percent, the highest rate since 1982. Further, January's revised job loss of 741,000 was the worst one-month loss since 1949. In February, 651,000 jobs were lost.
A Bloomberg News economists survey had forecast the economy to shed 650,000 jobs in March and the unemployment rate to hit 8.5 percent.
Almost every sector hit
It was a nearly equal 'non-opportunity' month: every major sector except health care experienced a loss of jobs. What's more, the nation's economy has now shed 5.1 million jobs since the recession started in December 2007, and an astounding 3.7 million jobs in the last six months.
In March, manufacturing cut 126,000 workers, construction jobs fell 161,000, business services cut 133,000 jobs, retail lost 48,000 jobs, financial services lost 43,000 jobs, and transportation jobs declined by 34,000.
Brace for even more lay-offs
Economists say there are some signs the recession may be bottoming as fiscal and monetary stimulus begins to take effect, but it will likely be several more months before job losses subside and employment, being a lag indicator, starts to gain.
Stewart Hoffman, chief U.S. economist for PNC Financial Services Group in Pittsburgh wants Americans to brace for additional job losses.
As he told Bloomberg News Friday, "The unemployment rate is not done rising and the gain in March won't be the last [...] With jobs still declining and incomes being squeezed, consumer spending still looks quite weak."
Further, the official job loss and unemployment statistics reflect a pronounced recession, but many economists say they don't measure the true nature of the nation's awful job picture.
That's because the Labor Department's unemployment rate does not include discouraged workers -- those people who are unemployed but have quit searching for work, either because they can't find suitable employment (or any job), or because don't think they'll be able to find one. If one includes discouraged workers, the nation's unemployment rate easily jumps above 10 percent and perhaps higher, many economists agree.
Further, when one adds part-time workers who want full-time work but can't secure it, to the aforementioned discouraged worker category, the nation's underemployed / unemployment / discouraged rate rises to 15.6 percent -- that metric's highest level since 1994, when the government starting keeping records for the stat.
Another tell-tale stat regarding the weak job market conditions concerns the number of long-term unemployed, which soared to 3.2 million from 2.9 in February. Over the past 12 months, the number of long-term unemployed has more than doubled from 1.3 million in January 2008. Economists generally agree that any long-term unemployment total above 1.2-1.5 million is unfavorable; levels above 2 million reflect weak economic conditions, with negative consequences for state budgets (due to increased social spending costs), and for mortgage foreclosures, among other social costs.
What will it take to get companies out of right-sizing mode and back in hiring mode? Increased demand, so says economist Ian Shepherdson, chief economist of High Frequency Economics.
"Companies will need to see stronger evidence of a sustained slowing in the rate of contraction in demand before the drop in payrolls will slow," Shepherdson told Reuters Friday.
Any positives out there?
It goes without saying that it's hard, on a day when investors learn that the U.S. economy lost another 663,000 jobs, to argue that there may be less-detectable signs that things may be getting better.
Well, if you agree credit is the key to small business function and that small business is responsible for the bulk of job growth (when it occurs that is), then we can point to some "green shoots" in the U.S. economy, as Federal Reserve Chairman Ben Bernanke aptly termed them several weeks ago. The Fed's TABSLAF and related auction facilities are loosening credit markets, and the Fed's superquantitative stance -- involving buying Treasuries -- is adding much needed funds to the money supply.
The question remains, however, concerning whether the credit that provides the grease for business expansion and job growth will furnish funds quickly enough to prevent unemployment from topping the awful 10 percent level? Neither Bernanke, nor one of the leading economists of the financial crisis era, NYU Economic Professor Nouriel Roubini, have ruled out the possibility of 10 percent unemployment in 2010. In reality, given that the nation already is at 8.5 percent now, with hardly an engine of growth to be confident about, it seems highly likely that the nation will experience its worst unemployment rate since the 1981-82 Reagan recession, when it hit a ghastly 10.8 percent in December 1982.
Also, the Center on Budget and Policy Priorities, a Washington, D.C.-based think tank, said Friday the dismal lay-off numbers should reinforce the nation's commitment to implement public policies to save / create jobs. The center said "Congress must not undermine the effectiveness of stimulus spending that it included in the economic recovery act just as it is starting to take effect in the economy." The Center added that "...states must use the money that Congress provided to them as intended so that it will have maximum effectiveness as stimulus."
U.S.: Flexible system
But one thing Americans can take heart in during trying times is, with the correct leadership as a guide, the American system has a remarkable ability to reform and renew itself.
University of Connecticut Professor of Political Science Howard Reiter, one of the foremost scholars on corporate capitalism, the U.S.'s economic system, reminds us that one hallmark and enduring quality of the American economic system is its elasticity. The freedoms which we all enjoy (and too often take for granted) provide a flexibility that allows the system to adapt and reform itself and implement innovation.
It is a major reason corporate capitalism exists in the states today.
For any American who hasn't traveled to Europe, or even out of the United States, it's hard to convey the economic (and political) advantages of the above, from a systemic standpoint.
But anyone who has traveled to Europe or is familiar with the blood and devastation that have stemmed in part from economic and political systems that could not adapt knows full well the American advantage. The world's most devastating and damaging uprisings in Russia (1917) and Germany (1933) stemmed from economic crises and failure. There, the economic crises threatened and tumbled the regimes, as it so frequently does in Europe, and around the world. In the states, the American system adapts, some reforms are passed, some social welfare and regulatory improvements are implemented, and then the same economic system continues, new and improved, like it says on the products on America's store shelves.
In other words, Americans blame the rascals -- and they throw the rascals out -- confident that there's nothing wrong with the Bill of Rights, the rule of law, and the separation of powers, and with the system that's produced un-equalled innovation and ingenuity. And the view from here is, they're correct.
So on this day when another grim jobs report was released, know that the nation, with the correct leadership as a guide, will emerge from this recession and job creation slump better, safer, and stronger. And you should expect nothing less from a people who hold these truths to be self-evident.
Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.